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May 14, 2012, 08.06 AM IST | Source: Moneycontrol.com

What to expect from Ashok Leyland's Q4 earnings

Its been a mixed road for commercial vehicle makers in the last one year. While sales of light commercial vehicles accelerated, medium and heavy trucks hit speed bumps due to slowdown in industrial actuvity and expensive loans. How was the drive in the fourth quarter?

Moneycontrol Bureau

Its been a mixed road for commercial vehicle makers in the last one year. While sales of light commercial vehicles accelerated, medium and heavy trucks hit speed bumps due to slowdown in industrial actuvity and expensive loans. How was the drive in the fourth quarter? We will know on Monday, as Ashok Leyland , India's second largest CV maker announces results.

Analysts expect the company to report around 19-20% growth in volumes at over 35,000 units in Jan-March, led by some revival in southern markets, where it remains dominant, and increasing demand for its LCV Dost, it launched last year.

Dost, produced in JV with Japan's Nissan, is among the newest launches in small truck space and has seen a good traction.

"We have a run rate of almost 2,500-3,000. We have got a backlog of orders going above 6,000 vehicles at any point of time. So we do believe that this run rate will further improve and this is in spite of the price increase in April," K Sridharan, Ashok Leyland's CFO told CNBC-TV18 in a recent interaction.

Dost may have boosted overall volumes, but being a low margin product, overall margins could be lower from a year ago, say Sachin Gupta and Ashish Poddar of Edelweiss Securities.  Other analysts too agree.

"Higher contribution of Dost in total volumes is likely to impact net average realisation and overall profitability," says Yaresh Kothari of Angel Broking.

Angel Broking expects Ashok Leyland's net sales will rise 12.3% year-on-year in the quarter, but net profit will be down 15% and operating profit margins will be down 250 bps.

Most other analysts' net sales expectations are in the 10-16% range. Net Profit is seen down as much as as 30-35% by some analysts. On a sequential basis, Ashok Leyland's net profit is expected to double, with net sales growing 40-50%.


Key things to watch out for:

- Demand outlook for FY13
- Ramp up and new launches in the LCV segment
- Future plans for its JV with Nissan
- Growth and plans in its U-Truck HCV range
- Raw material costs and margin outlook for FY13
- Ramp up in production at Pantnagar plant in Uttarakhand (eligible for tax benefits)
- Overall market share compared with Tata Motors

Ashok Leyland shares closed down 2.4% at Rs 26.85 on NSE on Friday. The stock is up near 18% since Dec-end. The wider CNX-Auto index is up 21% over the same period, while the NSE Nifty is up 7%.

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